Chegg Becomes First Company Wiped Out by AI Disruption The collapse of Chegg, once a dominant player in the EdTech sector, marked a historic moment in the evolution of artificial intelligence’s impact on traditional industries. The company’s downfall, which unfolded over a three-year period, was triggered by the rapid rise of AI-powered tools like ChatGPT, which fundamentally disrupted Chegg’s business model and eroded its market value. In early 2021, Chegg was at the peak of its success, valued at $14.5 billion. The company had built its empire on a proprietary database of 79 million step-by-step homework solutions, which it sold to college students for $19.95 per month. This model had been a cornerstone of its growth, particularly during the pandemic, when demand for online learning tools surged. However, the company’s dominance was short-lived. The turning point came on May 2, 2023, during an earnings call where then-CEO Dan Rosensweig admitted that ChatGPT, the free AI chatbot launched just five months earlier, was actively harming Chegg’s new customer growth. This admission sent shockwaves through Wall Street, leading to an immediate 50% drop in Chegg’s stock price. The company’s market capitalization plummeted by nearly $1 billion in a single day, marking the first time a publicly traded company officially blamed AI for its financial decline. The core of Chegg’s problem lay in the stark contrast between its paid service and the free, AI-driven alternatives. Students who once paid for access to human-generated solutions now had an instant, cost-free alternative in ChatGPT. The AI tool could not only solve equations but also explain underlying concepts and answer follow-up questions, rendering Chegg’s offerings obsolete. This shift created a “free vs.#chatgpt #new_york_stock_exchange #chegg #dan_rosensweig #ai_disruption
